Hi I want to do the exact same thing... i see the benefits of having the blog in a separate folder... but ideally though I would like to integrate the logins with my main application. I'll be using XML to store all data rather than SQL Server.

if anyone has any sugestions as to how best to approach this I too would highly appreciaite it... sorry
sutravekailas that Iam not able to post the answer myself.. but if I do work it out I will let you know!
jj

I blogged about that here. It's been rock solid for me. Essentially I pointed the web.config membership and roles providers to my aspnet membership table.
The trick is ensuring the parent app shares the same machinekey in the web.config with Be.NET and using the same application names with the providers.